Let Crest Appraisal Services help you decide if you can cancel your PMI
It's widely understood that a 20% down payment is common when purchasing a home.
Since the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5 or even 0 percent.
How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI.
PMI takes care of the lender if a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible.
It's advantageous for the lender because they obtain the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
Is PMI included in your monthly mortgage payment? Call Crest Appraisal Services today at (206) 592-0600 or send us an e-mail. Documentation of your home's present value could save you thousands.
How can buyers keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount.
The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little early.
It can take many years to arrive at the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your Washington home has increased in value.
After all, any appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold?
Your neighborhood may not follow national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends signify a reduction in home values, you should understand that real estate is local.
The toughest thing for many people to figure out is just when their home's equity rises above the 20% point. A certified, Washington licensed real estate appraiser can certainly help.
It's an appraiser's job to understand the market dynamics of their area.
At Crest Appraisal Services, we're experts at determining value trends in Des Moines, King County, and surrounding areas, and we know when property values have risen or declined.
Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
The savings from cancelling the PMI required when you got your mortgage will make up for the price of the appraisal in a matter of months. Nobody is more qualified than Crest Appraisal Services when it comes to appreciating values in Des Moines and King County. Contact us today.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
